Click here for the latest letter from Martin Armstrong entitled Borrowing From The Rich To Keep Socialism Going dated June 30, 2011 (8 pages). A MUST READ!

Great paper!! Mr. Armstrong talks about where his Economic Confidence Model is going for the next four years in more detail. It stems from a move from confidence in public (government) money to a confidence in private (corp stock/bonds) money. He uses the timeline of the Great Depression as an example.

Martin says from now until year-end:

Gold-risk of decline in gold going into 2012. A continued monthly closing below 1337 and a year-end close below 1428 will confirm a decline in trend into 2012.

Silver-a monthly basis below 26.40 and year-end below 30.90 would mean the same thing in silver.

Oct-Nov key for many markets.

S&P500- continued monthly closing above 1333 for new highs

DAX- to make new highs unless there is a monthly closing below 6736.

For next 4 years (into 2016):

Increasing problems with global debt issue

We are in a 7-year drought cycle (2007-2014), so food prices will remain high.

Higher DOW and other stock markets as capital moves from public to private

Increasing global political unrest and the rise of a substantial 3rd party in the US

It is all about the large amount of global debt (and each governments actions toward that debt) and the international capital flows that result from the confidence or lack of confidence regarding the debt.

Groovygirl wanted to write a post with some simple ideas for you to consider for the next leg of the ongoing global economic crisis. Things are getting a little hairy out there and many are suggesting that the second half of 2011 has the potential to be a repeat of 2008-2009. These are things groovygirl did before 2007, and boy, did she sleep better for it.

The purpose of the following is to preserve a portion of your net worth/savings from a currency collapse and enable you and your family to eat and live in case there is a bank holiday and/or supply-chain disruption.

So, with that in mind….

Have at least 10-20% of your net worth in physical gold and silver in several private vaults (at least one of which is outside the country).

Pay down debt. The less debt you have, the lower your monthly expenses, and the more flexibility you have to protect yourself by doing the following.

Have at least 1-6 months of living expenses in cash savings.

Of that savings, have some cash at home in a safe.

Of that savings, have your money in at least 3 different banks in regular bank accounts under the FDIC coverage limit.

Have enough food, water, and medicine for 1-6 months.

Groovygirl understands that some people may be unemployed or living paycheck to paycheck or on a fixed income. If you have no savings, start with accumulating extra food, water, and medicine first. Then, move to buying silver coins.

There are many other things you can do, but these are the minimum basics to complete right away, if you have not done so already.

You may have read a headline yesterday about the Bank of America out-of-court settlement on Tuesday with investors of mortgaged-backed securities.

Here is more detail that you need to understand from Reggie Middleton (via zerohedge). Very important to read the whole link.

The TBTF banks that sold huge securities from liar-loans will go bankrupt from legal exposure. Yes, B of A will go under at some point.

The banks have to settle out of court because a trial would force them to reveal all the illegal paperwork and fraud that went on.

Notice who the large holders are on that settlement and notice that they got about 75% of their money back in that settlement (of course, lawyers got their cut, too). Considering the securities are worthless paper right now, that’s a pretty good return. Smaller investors and pension funds will not be so lucky.

The big banks that go under will walk away from houses. They are already doing so. The housing market is stalled, it will continue to be stalled and then continue to decline.

If you or your investment funds own these mortgaged-backed securities, get rid of them if you haven’t already. Also, loose the TBIF banks too. Reggie and others have suggested that of the 6 TBTF banks, only two (JPM and GS) will be left standing when it is all over. All the TBTF banks are bankrupt, but two of them have better political connections than the rest. This will be a long process, but do not let the long timeline fool you into thinking that the banks are solvent and safe.

GG would also suggest making sure that if you have funds at any TBIF bank (or any bank for that matter) that they are under the FDIC amount. You should already have your accounts covered in that way from the last banking crisis in 2008-9.

Here is more information on the run on money market funds. It seems the “everything is fine” talk from the EU officials on Greece and all PIIGS debt the past few weeks have not been fooling the investors in money market funds.

Is it just me or does it seem like all hell is breaking loose after Martin’s June 13-14, 2011 turning point date? But, mm funds, Greek rioting/bailout, Italian banks, oil reserve release, US debt talks break down, 50% silver coin premium from US Mint, no physical silver at the COMEX, B of A $8.5 billion settlement…..

Chris Martenson has a new post out about owning gold and silver. Click here. Very detailed.

Of course, he is preaching to the choir as far as groovygirl is concerned. Make sure you are holding the core of your gold and silver investments as physical, not paper, for the long-term.

Totallygroovygirl suggests that you have at least 20% of your net worth in gold and silver. She suggests that you have at least half of that in the physical metal in several private vaults (depending on the amount) and at least one outside of the US.

If you are younger or are willing to take more of a risk, you can go for up to 50% of your net worth in physical gold and silver distributed in several private vaults. Keep in mind that this bull market could last for another 10-15 years, so patience is a virtue here. Or, it could hit a high 2015-2018.

If you are retired or entering retirement in a few years, keep to the 20% allocation. Physical gold and silver is not a reliable income producer, it is a savings preserver.

Groovygirl suggests you have at least 20% in gold and silver, because we will have a currency collapse at some point. This is your insurance for that collapse.

If you haven’t heard the physical silver market is under extreme pressure and has been for some time. Click here for an updated post from Jesse over at Cafe Americain.

He believes that the silver shorts (or the over-leveraged silver paper market) might break soon. But they have manipulated their paper position well the last 2 years, they could continue that successfully for a while longer, but not forever. It will break.

It has been clear for some time that the COMEX has less and less physical silver to deliver. (This will impact gold too at some point, but silver will be the first to go.)

Conclusion:

This will educate all that the COMEX silver price is really a paper silver price.

This break will prove to all that metals are way under-priced and being manipulated at the 100:1 ratio.

This break will prove to all that you should hold only physical metals, not paper, for the long-term.

This will drive the price of physical metal through the roof. (And here we go…Mint to sell new 2011 silver coins at $59.95 as official silver price is $34.72, that is a 50% premium. Click here.) Do not sell any physical metal. Hold your position.

This will probably require a bailout of JPM and others holding large short positions in silver. It is possible that there will be some economic disruption before or after that “bailout”.

Jesse’s quote for the day is very appropriate for this conversation: “Lust and Greed are more gullible than innocence.” Mason Cooley

June 28, 2011

There are some warnings being issued from the blog-o-sphere regarding global money market funds. It seems they are under pressure with withdraws, presumably from the Greek Debt Crisis. We have had other mini-runs the past few months (every time there is a hiccup in the PIIGS debt situation).

This one might actually cause some problems. Jim Sinclair has a warning on his site.

If you remember, the last time there was a run on the money market funds, all corporate short-term credit stopped and thus daily functions stopped. The Fed and Treasury started lending huge amounts of cash overnight just to keep companies like GM and GE open on a daily basis.

Corporations and retail short-term money lenders use money market funds to lend companies short-term cash (among other things) to run their businesses, pay their employees, buy raw materials, etc. Like a credit card that you pay at the end of each month that you put all your business expenses on. Imagine if that credit card got rejected in the middle of the month and your customers weren’t going to pay you for another 30 days?

The last run also caused the FDIC to release a statement that they would cover any money market bank account losses to keep small investors from withdrawing their cash from the US Banks. Banks sweep their individual money market accounts each night and hand it over to these larger funds for a higher return on the money. That’s why you get that “huge” return of 1.2 % on money market accounts and that is also why they are not normally covered by the FDIC bank account insurance. If you read the fine print on your mm account, it will say that may have to wait to receive your money because it is in an outside fund and not part of the bank’s accounts.

Don’t panic. Just understand the risks. The last time this happened some people were waiting up to 6 months for their all money market money. GG doesn’t think you will lose your money, you just may have to wait for it or wait for all of it. So, the solution would be have some cash at home and some savings in a regular bank account (or in a couple of banks) in case a major run happens and you need money right now. Based on past experience in 2008-2009, you should already have your liquid cash savings organized in this way. (Side musing: you don’t need all your cash savings split up this way if you don’t want to, just enough for a few months worth of living expenses in case funds should become suddenly “tied up”.)

I hope you are cluing in to the fact that NOTHING IS FIXED and the same things that happened in 2007-2009, will happen again. So, if you were lolled into a false sense of security and have not prepared, do so now.

Martin describes the differences of his model vs. Kondratieff and the similarities. Both are long wave cycles. But while Mr. Kondratieff focuses on charting specific markets, Mr. Armstrong focuses on charting the panics first, then the market the panic might be in. In this way, Martin has back-tested his theory throughout history. Martin discusses the fall of Rome as an example of his 51.6 year cycle.